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Posts Tagged ‘Economy’

America has a nasty habit when it comes to maintaining our military– we fight, throw all of our economic and industrial might into the battle… and then destroy the military created the day after the armistice is signed. The ugliness of this cycle has, of course, become greatly magnified during the era of industrial-technological warfare; with the drawdown post-World War I setting us up for WW II, the post-WW II drawdown enabling the North Koreans to launch their war in 1950 and push the Americans all the way to Pusan within roughly 5 weeks. Drawdowns occurred even in the Cold War settings that followed Korea and Viet Nam, always returning America to a dramatically weakened strategic position than it was in during the war.

The reasons for this are clear– in a democratic society war fatigue runs high and the will of the people to be reminded of war after the fact is low, leading to demands for a “peace dividend” and for tremendously reduced military spending. This is, of course, a sensible response– unbridled military spending during peace time can be ruinous, but in the course of American history we have traditionally overcompensated for this sentiment and cut back to the point of fundamental weakness with relation to our global responsibilities.

As the most active portion of the ill conceived and strategically unsuccessful “War on Terror” comes to a close with the shuttering of the Iraq Theater, war fatigue is running particularly high at the same time America deals with a financial crisis that makes spending on military systems particularly painful. The situation is further complicated by the traditional dual impetus to reduce military capacity coming at a time of transitional technology, in which robotic systems seem nearly ready to displace traditional man-in-front systems.

Into this maelstrom flies the F-22 Raptor, a tremendously advanced aircraft with no clear role in the current war and a pricetag that represents the cost of ten to fourteen F-15s, the current American fighter in the air superiority role that the F-22 seeks to fill.

The Obama Administration’s stance on the F-22 is clear– we don’t want this thing. The Congress is divided between fiscal responsibility and the fact that suppliers for the F-22 project have been strategically salted throughout the most important Congressional Districts in the nation, making the vote tough for key Congressmen and Senators. The Air Force sees the design potential of the aircraft and wants many, many more. The other three services see the Raptor as the usual platinum plated Air Force toy– good only for air-to-air combat and useless in the close air support role that has been so incredibly vital to the Marines & Army in this and the past several wars. They may have a point– since 1991 and Operation Desert Shield/Storm, through Somalia and Kosovo and the WoT, the US Air Force has made fewer than 25 air-to-air kills against jets of an enemy air force, all of them in 1991 in the air war phase of Desert Storm. In that same time, over 10,000 missions have been flown against targets on the ground.

Oddly enough, that disparity makes, for both sides, the most militarily compelling argument over the F-22. The President, the members of the DoD not wearing blue suits, and the budget conscious can point to the scarcity of air-to-air combat and make the seemingly rock solid case that an incredibly expensive air superiority fighter is unneeded; the Air Force can conversely claim that we have fallen into the trap of falling the last war rather than preparing for the next against a more symmetric adversary against whom the F-22 would be a key to American victory over China, Russia or (in a stretch) Iran. “Fighting the last war” is a phrase loaded with meaning to military planners and historians, an indictment of the thinking that what worked last time will prevail next. The Maginot Line is an oft-cited example of fighting the last war; the French built a huge line of fixed positions that mimicked the trench system of the First World War in the hope that it would secure France from Germany; Germany on the other hand had prepared for the next war by developing mobile operations featuring tanks and trucks that easily outflanked the Maginot Line. It’s a damning accusation.

Later today the Congress will issue an up or down vote on continued funding for the F-22, and the vote counters are hard at work trying to figure out the balance between self interest, military necessity, financial prudence and technological advance. Running Local will be back after the vote with Part Two of the story.

Nothing can mess up a marriage like money problems; hell even Billy Joel has popularized that concept in Scenes From an Italian Restaurant. When money becomes an issue, everything else goes on the table– bitterness, greed, jealousy and the real killer, irrationality.

In the marriage between our government and the American people, money has become an issue, and irrationality is raising its head above the swirling currents of anger, frustration, and fear.

Take, for instance, this week’s explosion of craziness over the A.I.G. bonus payments. Yes, on the surface it is maddening– the American taxpayers are floating A.I.G. and they’re busy shipping TARP money overseas or handing it out in bonus checks to the idiots who were the engineers and mechanics of the train wreck that A.I.G has become. While many families struggle through layoffs and while houses are being taken by the banks at rates never before seen, the rich are getting richer; anybody can understand the anger that would generate. The problem is that we’re getting lost in that anger and risk doing serious, lasting damage to our nation as a result of it.

In today’s New York Times, Andrew Ross Sorkin charts a personally dangerous course in his Dealbook column under the headline The Case for Paying Out Bonuses at A.I.G. There’s a case for paying out these bonuses? Really? The man must be insane and be courting a Rushdie-esque fatwa called down upon his head by Imam John Q. Public. In this environment who could ever support dishing out more money to the boobs at A.I.G.?

A very prescient man, that’s who.

The contract is the fundamental building block upon which American business is founded. No matter how onerous a deal may turn out to be in hindsight, a contract is a contract and must be honored short of bankruptcy. Yes, you can always ask the other party to renegotiate a contract for the mutual good, but you can not simply walk away from the provisions of a contract because one party just doesn’t like it anymore– at least not without a lawsuit that will see the walker getting nailed for doing so and ordered to perform. Without that surety, there is no such thing as a credit market– a loan or credit agreement is a contract, of course, assuring the lender that the borrower will repay the loan with interest or else forfeit some valuable property in lieu of cash payment. The contract is as close to a sacred concept as exists in the profane world of business and economics. It’s preservation is paramount to our very existence, and one of the key roles of government is providing the tools in the form of the legal system to enforce and ensure contracts.

And now, out of anger, we’re demanding that the government set a precedent that will hopelessly erode the sanctity of the contract because, well, we’re damned angry and have a right to be. The bonuses that are the object of so much ire right now weren’t concocted last week as a boondoggle to enrich a few financiers; they were the result of employment contracts signed before the wheels came off of the economy between A.I.G. and its employees. Whether or not those employees deserve the bonuses in light of all that’s happened, whether or not we want taxpayer money funding those bonuses, whether or not we’re out of our minds with anger, these bonus payouts are mandated by valid contracts that have to be honored simply because they are valid contracts. To have no less an entity than the Federal Government try to abrogate these contracts because the American taxpayer is angry… well, that’s not an avenue any sane person would seek to go down, is it? The slippery slope is an old argument, but precedent is also one of the underpinnings of our society. If the government can step in and simply toss out the provisions of a series of valid contracts because the Congress doesn’t like them, what is the point of the entire system?

The counterargument most offered by bloggers and commentators to this line of thought– that simply tossing out valid contracts is rank idiocy that will be killed by the Courts as it should be– is that A.I.G. is now largely owned by the taxpayers anyway and would have gone bankrupt had the government not stepped in… and bankruptcy is the ultimate voider of contracts. All well and good, save one tiny flaw– that damnable phrase, “would have”. Yes, the government stepped in and the American taxpayer got the bill… to prevent A.I.G. from going into bankruptcy. We stopped A.I.G. from going bankrupt and collapsing because their existence, as twisted as this might seem, is integral at this point to the economic recovery. When we made that choice– to prevent A.I.G. from going bankrupt by, essentially, buying the company, we bought not only its assets but its liabilities and commitments, as well. We are now a party to the employment contracts that mandate these “retention bonuses”, and as a responsible party that is interested more in the overall health and resurgence of our national economy rather than the sideshow BS of the A.I.G. bonus flap, we must hold back our bile and sign the damned checks. To not do so is unthinkable and, should this hit the courts some day, illegal. You don’t have to have stayed in a Holiday Inn Express last night to see that, even if like me you hate the concept of paying out this money.

Ditto the ire over A.I.G. taking bailout money and paying it to European and Asian banks rather than keeping it here int he States. A.I.G. owed debts to those institutions and needed to satisfy them under contractual obligation. We cannot give A.I.G. money with which to save itself and thus prop up our economy and then tell them that they can’t use it to satisfy their liabilities– what else would we be giving it to them for but to kill bad debts and satisfy other liabilities so that it may continue to function as a business entity?

Now, that doesn’t mean that we can’t ask for the money back, that we can’t publicly hammer the employees getting these bonuses in an attempt to shame them into not accepting them… but if they say no and want the money owed them, then it’s up to us to perform up to the terms of the contract.

There are no popular solutions to a financial crisis as deep as the one we’re in– the issues are too complex for the average person, myself included, to understand every intricacy and every interconnection. Moves that make sense may be counter-intuitive, and certainly may be the cause of immediate anger from the population. What me must use as our guide in determining sentiment is a baseline fundamental of common sense– do we want to live with contracts providing no surety? Do we want our employers to unilaterally change our contracts? Do we enjoy seeing products on the shelves of our stores, being able to borrow to buy a home or a car or a boat? Do we want to be sure that when we contract out a job that he job will be done? Of course to all of those, so, too, of course to paying out the bonuses contracted for. We cannot have one without the other.

Money can break up a marriage, but the one between our government and ourselves must be saved. We all need to take a deep breath, accept that there will be things that must be done that might not feel great up front but that must be done, noentheless, to get everyone back safe in their beds at the end of this long, dark day.

But at this particular moment, with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back to life. It is only government that can break the vicious cycle where lost jobs lead to people spending less money which leads to even more layoffs. And breaking that cycle is exactly what the plan that’s moving through Congress is designed to do. –Barack Obama

Yesterday, Barack Obama finally got back to doing what he does best– taking his case to the people of our nation and rallying them behind policy positions that previous administrations of both stripes have considered to be “above” them, too complex to understand and thus not worth attempting to explain. Suffice it to say that you never would’ve seen George Bush (pick your iteration…) in front of a large crowd of politically unscreened citizens handed microphones to ask questions after being given a straight assessment of the problems facing our economy and the extraordinary tasks that need to be undertaken to quell them. Yesterday in Indiana and today in Florida, however, that is exactly what we have and will see Barack Obama do. Lest you think that these were randomly chosen locales, recall that Indiana and Florida were two of the toughest Red states that flipped to blue in the election, a clear reminder to the Senate and House of who they’re dealing with, politically.

Some of the questions he received yesterday were extremely critical of him and his administration– one was delivered by a woman who identified herself as “…one of those who think you should have a beer with Sean Hannity”– but they were handled with aplomb and humour as the cost of doing business for a President who knows that he will have to deal with detractors head on to gain the trust of a nation. Like him or not, that’s a refreshing…wait for it… change.

Last night Obama went before reporters for a live prime time presser and again handled everything thrown at him, acquitting himself well and making yet another strong case for his particular vision of a stimulus package and the steps needed to fix the economy.

Obama and his aides are not fools– they understand that despite the losses of the Republican Party and the seeming rejection of its philosophies by the voting public, there is still an aftertaste of the conservative fiscal policies that the Bush Admin and the House Republicans, in particular, have told America that they were practicing for the better part of the last decade. There is a seductiveness to talking about tax cuts and limiting government while ignoring the larger issues that drive the economy and the nation; it’s fiscal porn. Why talk about having to free the liquidity of the credit markets when you can talk about the bliss of a paycheck less encumbered by taxes or the pleasures of getting government “off of your back”? The GOP has engaged in this quite literal application of bread and circuses and has done so well– give the people some extra bread in their weekly take-home while keeping them diverted with asinine wedge issues like gay marriage and putting the Ten Commandments on public property and they conveniently forget to take a look at what Fannie & Freddie are doing. It’s undeniable– and undeniably sad– that this formula has worked politically so well for so long.

What Barack Obama has been giving us, literally, is the opposite of fiscal porn– it is depressingly honest at times, featuring quotes like the above and a constant reminder that “the party is over” or “this is the worst financial crisis we’ve seen since the Great Depression”. Obama is treating us as adults and partners, not only in the problem but in its solution. Not only is this the right thing to do– our grandparents handled the Germans and the Japanese, I think we can handle Goldman Sachs and sovereign wealth funds– it is also the politically smart thing to do. As noted by David Gergen last night on CNN, last week saw the Admin focus entirely on policy and working the hallways at the other end of Pennsylvania Avenue. They were effective in doing so, getting a fixable stimulus package through the House and then saving a better bill in the Senate, but they also allowed public support for the bill to erode. They gave people like Jim DeMint, Lindsay Graham and Mitch McConnell the media floor to rally against what they saw (often mistakenly, sometimes correctly) as excesses in the bill passed by the House and attempted to make the bill a referendum whose choices were Nancy Pelosi’s “San Francisco Power Bitchery” or the Debbie Does Taxes myth of Republican fiscal responsibility featuring their promise about going down on taxes and the double penetration of cutting spending while shifting focus to social issues.

When given the choice between someone with a plan, an actual way to move forward on a problem, and someone who tells you that the best thing to do is either nothing or, worse, admits the problem and then tries to hand you another that has the illusion of being easier to solve, the choice is clear. Obama has a proactive plan of attack that he’s willing to talk about and allow scrutiny of; he’s been honest enough to say that his plan will sometimes lead into blind alleys or need to be adjusted along the way, and that pain will be felt by all as we move forward. What he describes and the way he describes it is very much akin to a war; the comparisons to FDR have already been made ad nauseum, but it is impossible to not note here the latter-day Fireside Chat ethos of Obama’s town hall events this week and his general willingness to tell us we’re in for a bad ride for the next few years– but also that there is an end to the ride in sight in the distance. The war that Obama describes isn’t a war in the sense that Mr. Bush forced us to grow accustomed to; the war that Mr. Obama lays out has clearly defined goals, a frank assessment of risks and challenges, and a strategy to overcome them. It is also explained as war without fait accompli as a component– in this war, the enemy will fight back and will even win battles. We start this war much as we did World War Two– under attack, shocked and dazed, with an enemy in the field that will be initially superior to our efforts to fight it. We are also uniquely suited to grow in strength throughout the fight and overwhelm the problems facing us as long as we do so in a progressive (little “p” progressive, note) fashion that has us methodically building a foundation and then laying successes atop it until the overall fight is won. We started World War Two with crappy and far too few airplanes, a Navy that needed to be built from the keel up, and tanks that were ten years out of date but with a strong base from which to fix those problems. We start this war similarly challenged, with a fiscal sector in chaos, with corporations running out of date models, with too few and patently lousy tools to manage Wall Street, but with the ability to fix those problems with some discipline and some reassessment and realignment of our priorities.

Obama is our Roosevelt; Geithner & Summers our Marshall & Eisenhower. The fight will be long, but it is on. If that doesn’t sound like fun, though, Ann Coulter is going down on your tax bill over at FoxNews LateNight. Your choice.

It’s no secret that some Federal officials have an overblown sense of their importance and that of the agency they work at; still, sometimes they manage to surprise.

Take Postmaster General John E. Potter, for example. Holding a title that sounds like something from a Gilbert & Sullivan operetta (He is the very model of a modern Postmaster General…), Mr. Potter is the gentleman currently responsible for upholding that credo we all learned as children about neither rain nor snow nor the attack of 93 foot long wasps with peptic ulcers preventing the brave boys and girls in blue from stuffing our boxes with legacy SPAM.

According to Mr. (Gen?) Potter, the economy is about to do to the mail service what even those ornery mutated insects could not– prevent the delivery of mail on Saturdays to every address in the United States. At least that is what Mr. Potter has described as the “worst case scenario” in testimony before a Senate subcommittee.

The horror.

You see, the economy has caused a downturn in the amount of mail being sent, which is causing the Postal Service to lose not only the usual birthday cards and checks but also roughly three billion dollars last year. Eliminate Saturday delivery and you save somewhere between two and three billion dollars. This seems like a no-brainer to me– is Saturday delivery really terribly important, Mr. General?

It would seem that to Supreme Mail Commander Potter it is, in fact, critical to the very fabric of our nation. I myself see other things that could be counted as “worst case” scenarios for the Postal Service. How about massive layoffs? Pretty bad. Let’s try on the concept of eliminating door-to-door delivery entirely and dropping mail at central points, a la many of the suburban subdivisions built in the first years of this decade? Not a disaster, but surely more inconvenient than no mail on Saturday. How about the deep discounts for bulk mailers becoming financially untenable, which would set off a vortex effect of loss of demand for the mail service entirely? If that came to pass we wouldn’t just be talking about eliminating needless Saturday deliveries.

What Lord High Admiral of the Post Potter is failing to recognize is that his service is becoming anachronistic. There will of course be a need for the delivery of physical mail for the foreseeable future, but mail is no longer the integral form of communication that it was when the concepts and even the “modernizations” of the system were codified. Looking at the usual population of my own daily mail, advertisements outweigh actual content by about 1.5:1. While the ads are annoying, we must recognize that they keep employed a large number of Americans, from printers to marketers to salespeople and, yes, the good General’s field troops. Still, I do not need them six days a week. When I look at the stew of bills, official docs, greeting cards and the occasional check that make up the balance, I see efficiencies to be made that the market has already started to dictate. Many of us use electronic bill pay and electronic statements for all of our repetitive bills. The Evite has replaced the paper invitation for many people under the age of 50; the greeting card should be headed for the same fate. Electronic transmission of documents is an old story, goign back to the fax of the ’80s through email and now e-signature. Why the DMV, IRS, and other government agencies can’t move to those models and away from legacy paper mystifies me; send me an email when it’s time to renew my car registration and I’m a lot more likely to deal with it than if I receive a piece of paper that the kids will probably grab off of the counter top and draw lions battling clone troopers on.

So, in the end Mr. Postmaster General, I’m pretty sure that the old saw about a crisis for you not translating into a crisis for me applies to your “worst case scenario”. Give me two days without mail rather than just one and I’ll be fine. Give me one day without email and it’s a disaster.

“I’m big and black, clickety clack, and I make the train jump the track like that”–Cowboy Troy…because, hey, how often do you get to open a political post with a Hick-Hop quote, right?

One has to question whether or not John Boehner is clinically stupid. I’m sorry, I know that’s a fairly harsh lede, but really, Mr. Boehner, have you lost not only your mind but your will to lead the House GOP back into a position of at least some authority after the 2010 midterms?

Yesterday saw President Obama’s barreling freight train take a short ride down Pennsylvania Avenue to meet with the House GOP on their own turf, in the Capitol itself. Mr. Obama, who has built a national popular groundswell on the concept of a post-partisan Presidency has also done something a bit more realistic amongst the political cognoscenti– he’s made them understand that as far as the media is concerned that groundswell is at least founded on a sincere effort to work across the aisle.

How– no, why– then would Mr. Boehner try to marshall a lockstep partyline vote ont he Stimulus Package and show his hand before Obama convened the meeting with the House GOP? Is there a worse move that Mr. Boehner could have executed than to put a nation hungry for cooperation and terrified of where the economy is going than to show that he will not even pretend to cooperate and will let the economy burn while he plays politics with our lives?

I understand that there are philosophical differences between President Obama’s vision of how to fix the economy and, say, Jeb Hensarling’s or Jim DeMint’s in the Senate. They are part of a legitimate policy debate and absolutely need to be explored– which is what the President was doing on the Hill yesterday. It’s easy to spout a cynical view of the meeting and say that Obama went to simply break the GOP to his view, but it would also be an incorrect view; if Obama wanted a simple show he would’ve summoned Boehner, Eric Cantor, and a few other GOP Leadership/fiscal conservatives to the Oval for a photo op. He didn’t– in his first week he actually went to the Capitol rather than bringing people to the White House and met with the full GOP Conference. If you aren’t a DC type, what you need to understand is that a President leaving his turf to go to the Hill for something like this is a sign of one of two things– a defeated President or a hell of a lot of respect. Clearly, Obama is no defeated President.

So, in said hungry country, a wildly popular and brand new President humbles himself by going to the Hill as a sign of how willing he is to work with a loyal opposition. What is the media treated to by his hosts? A pre-meeting flurry of press avails featuring GOP leadership and ranking members saying that they are voting against the plan before even hearing what President Obama has to say. Politically, this is madness.

What Minority Leader Boehner is trying to do is clear– he’s trying to carve out a position for the GOP for 2010 by opposing government spending. Forgetting how laughable that is after the last eight years of GOP largess, it is understandable– he’s in a failing and falling minority and his only “traditional” lifeline is to stake out a position diametrically opposed to the Democrats and appeal to his base. By doing this, however, Rep. Boehner ignores a few things. First, America is scared and looking for someone to do something to get the long process of fixing our economy under way and, rightly or wrongly, they are blaming the traditional GOP positions and personalities for creating the crisis. The way for the GOP to start picking up seats is, clearly, not retreating to those positions. Second, Mr. Boehner is courting the tag of being an obstructionist, perhaps intentionally, perhaps not. Either way, it is the absolute wrong tenor for him to be taking– people want an amalgam of Democratic & Republican positions to make up this bill but they’ll settle for a purely Democratic one. Boehner, if he wants to forestall another dramatic loss in 2010 (and another serious internal challenge to his leadership this Spring), needs to get some of his positions into bills like this by cooperating and showing that the GOP is capable of governing at all.